IT may seem strange that London has volunteered to help shoulder the cost of any Irish bailout when Britain has remained resolutely outside the eurozone.
But there is no other European country that stands to lose more if Ireland’s economic problems worsen or the banking sector collapses.
While we often chaff at our larger neighbour’s indifference to Irish matters, it is not also appreciated just how large a role Ireland plays in British commercial life.
One only has to walk into any shopping centre in this country to see why. Stores such as Tesco, Marks & Spencer and Boots have invested heavily in Ireland and now depend on the Irish economy for some of their profits. Ireland is home to 40pc of Northern Ireland’s exports.
Large Irish companies such as Ryanair and CRH are big employers and form an important part of the UK’s economy.
This interdependence was emphasised yesterday when Dublin-based Greencore agreed to merge with British food manufacturer Northern Foods to create a major player in the ready meals market. Greencore is already Britain’s biggest provider of sandwiches.
These links are the reason why the British chancellor said in Brussels that “it's in Britain's national interest that the Irish economy is successful and we have a stable banking system”.
It is also why the governor of the Bank of England, Mervyn King, said on Tuesday that the exposure of British companies and banks to the Irish economy is “something which is relevant to concern about financial stability in the UK”.
The faltering banking sector is perhaps the most obvious source of interdependence. Ulster Bank and Bank of Scotland have lent tens of billions to Irish companies and Irish developers, while Irish-owned banks account for about 7pc of corporate loans in Britain. The British post office’s banking system is also operated by Bank of Ireland.
A further headache for the British is that the UK stands to lose if our problems spread any further to other weak and indebted members of the eurozone like Portugal and Spain.
Geoffrey Yu, a currency strategist at UBS, warned earlier this week that an Irish banking collapse would be a “double whammy” for the UK economy already struggling with budget cuts.
“As several major UK banks are now state-owned, any Ireland- associated losses would also affect the country’s fiscal condition – right in the middle of an austerity drive,” he said.
British officials have been working closely with their counterparts in the Department of Foreign Affairs and the National Treasury Management Agency to ensure that NAMA does not inadvertently destabilise the property market in London or Northern Ireland where any sell-off of Irishfinanced land could have severe knock-on effects.
With the British retail and banking sectors exposed to the Irish economy, the UK can ill afford any collapse here. Those fears, as well as the deep and genuine political ties which have followed in the wake of the Good Friday Agreement, were the inspiration for the UK’s decision yesterday to make it clear that London will back the eurozone if the crisis deepens.
Still, it will not all be plain sailing. The eurosceptic wing of David Cameron’s Conservative Party has expressed unhappiness with the idea that British money would be tied up in a eurozone bailout. The problem for Mr Cameron is that some sort of European mechanism would be the best way to ensure repayment.
A further problem will be setting an appropriate interest rate. The 5pc rate the eurozone is expected to charge would not be enough for Britain to make a profit. The devil, as always, will be in the detail.